According to a recent report in HT Mint, foreign investors are betting on India’s power sector, attracted by a rising demand for electricity amid the expansion of data centre capacity. Large companies like NTPC and Tata Power have already seen strong inflows.
Alongside this, the Indian government has also been supporting the data centre ecosystem with initiatives, such as a tax holiday till 2047 for foreign companies using India-based data centres for global cloud services, and positioning data centres as a core pillar of Digital India and AI-led infrastructure in the country. While these policy tailwinds have played a role in accelerating investments, there is opportunity in data centres beyond just power generation.
What data centres actually need and what the supply chain involves
Data centres are, at their core, energy-intensive with little room for downtime. They host servers, cloud infrastructure, financial systems, apps, AI workloads, and any downtime can lead to: service outages, financial losses (especially for banks, e-commerce, trading platforms) and data risks. This is why they invest heavily in power generation and supply. This includes everything from multiple power feeds, backup power, and reliable physical infrastructure.
For a megawatt of power centre capacity, there’s a cascading input/demand cycle along with it, after power is actually generated:
- Transmission networks and transformers
- Cables
- Power infrastructure
In India, much of the post-power generation ecosystem is made up of smallcap companies. Here is a closer look at how it works.
Smallcap companies in power transmission and transformers
Transformers regulate voltage, stepping electricity up or down for efficient transmission and safe usage inside data centres. They are critical for the functioning of data centres because they ensure stable voltage flow, support high-density power loads, and also help enable redundancy systems (redundancy is the use of multiple power systems/backup power).
- Transformers and Rectifiers India: The company is a leading Indian manufacturer of transformers and reactors, catering to diverse end-use sectors such as power transmission, generation, renewables, railways, and infrastructure. It has the capability to produce high-capacity transformers of up to 500 MVA, including ultra-high voltage classes, positioning it well for large-scale and complex projects. The company’s strengths lie in its strong presence in the high-voltage and specialty transformer segment, a well-established global footprint, and advanced manufacturing and testing capabilities.
- Shilchar Technologies: The company manufactures a range of power and distribution transformers, including telecom and other specialty transformers, serving sectors such as utilities, renewable energy, industrials, and EPC players. It currently produces transformers of up to 50 MVA and 132 kV class, with ongoing capacity expansion. The company has built a strong presence in the renewable energy and industrial segments, supported by its focus on high-quality, specialised transformers across applications, including high-frequency and inverter-duty transformers. It also benefits from a diversified global customer base spanning utilities, EPC contractors, and industrial clients.
- How they may benefit: Globally, transformer supply is tight, making this a capacity-constrained, high-margin segment.
Smallcap companies in cables and power circulation
Cables can be considered the circulatory system of data centres, since they carry electricity across the facility and help support internal and external connectivity. They also enable redundancy by helping run power through parallel systems, keeping facilities running 24×7.
- Dynamic cables: The company is a manufacturer of power infrastructure cables, including LT, HT and EHV cables, along with control and instrumentation cables, flexible and industrial cables, solar cables, and railway signalling cables. They supply to a diverse customer base comprising government discoms, private distribution companies, EPC contractors, industrial clients and export markets, reflecting its strong presence across power transmission, substations and distribution infrastructure.
- Finolex Cables: Finolex is one of India’s leading manufacturers of electrical and communication cables, with a product portfolio spanning power cables, control cables and optical fibre cables. Electrical cables make up a chunk of their revenue, contributing about 84%. They cater to a wide range of sectors including power infrastructure, telecom, construction and industrial applications, giving it exposure to both electrification and digital connectivity. It has a strong domestic distribution network along with a growing export presence, and benefits from brand recall across retail as well as institutional segments.
- How they may benefit: Cable companies tend to benefit from strong volume growth driven by infrastructure and power sector demand.
Smallcap companies in power infrastructure
Power infra and EPC companies lay the groundwork and build out the framework for power transmission. These companies are responsible for building transmission lines, setting up substations, and executing grid infrastructure. In the context of data centres they enable last-mile connectivity and help execute large-scale power projects.
- Kalpataru Projects International: The company is a global EPC player with business interests across a number of segments, including power transmission and distribution, oil and gas pipelines, and biomass-based power generation. Power transmission and distribution is the second-highest contributor to its revenue, and Kalpataru executes transmission line projects, tower manufacturing, and solar EPC projects. Their key strength lies in its execution capabilities and large order book visibility, positioning it well to benefit from sustained investment in grid expansion and power infrastructure.
- Skipper Limited: Skipper manufactures transmission towers and undertakes EPC solutions for power T&D (transmission and distribution) projects, making it a key participant in grid infrastructure development. With integrated capabilities spanning design, manufacturing and EPC execution, Skipper is well positioned to benefit from rising investments in transmission infrastructure driven by increasing power demand and electrification.
- How they benefit: EPC companies are often early-cycle beneficiaries of infrastructure capex, with order inflows acting as an indicator of future revenue growth.
Powering the AI revolution
The market noise and narrative today around data centres has been largely around power generation and facilities, but the deeper understanding lies beyond it. As demand scales, the focus and requirements will shift from power generation to equipment, execution and other layers that make up the ecosystem. And with more data centres being proposed, grid expansion and a demand for electrification, a range of smallcap companies from transformers and cables to EPC and infra may stand to benefit.
Sources
Global risk sparks $497 million flight to India power stocks by FIIs in February | Stock Market News
Budget 2026-27 lays strong foundation for AI Data Centres and Semiconductor Ecosystem
Uptime Institute Tier Classification System
Forbes – Data Center Uptime: What It Really Means
Scaling bigger, faster, cheaper data centers with smarter designs
Data centers and AI: How the energy sector can meet power demand | McKinsey
Transformers & Rectifiers India Ltd share price | About T R I L | Key Insights – Screener
Shilchar Technologies Ltd share price | About Shilchar Tech. | Key Insights – Screener
Dynamic Cables Ltd share price
Finolex Cables Ltd share price
Kalpataru Projects International Ltd share price
Kalpataru Projects International Limited – investors
Skipper Ltd share price | About Skipper | Key Insights – Screener
Infrastructure Division | Skipper Limited